SunFunder Adds 'Beyond The Grid' Fund For Solar Projects In Places Without Electricity

When we last met Ryan Levinson it was 2013 and he had recently co-founded SunFunder. The San Francisco and Tanzania-based social enterprise provides financing to sellers of solar-powered lighting and cell-phone charging systems mostly in African, Indian and other communities in developing countries lacking electricity.

Small kiosk in Uttar Pradesh lit up by solar-powered energy system (Photo credit: SunFunder)

Since then, SunFunder has helped 2.5 million people get access to solar energy, according to Levinson. And it recently introduced a new fund, the “beyond the grid” solar fund, worth $21 million, with plans to grow it to $50 million.

The impact that solar lighting has on communities reaches into many aspects of people’s lives. Children can study for longer, businesses can stay open later, homes are healthier because families aren’t using fire-prone kerosene lamps and communities are safer, since people can travel by foot at night. “It can be life changing,” says Levinson.

Levinson and his colleagues financed their first projects through a crowdfunding platform listing individual initiatives. “It was a great way to start, instead of spending two years forming a big fund,” he says. “We were able to make a few loans quickly and figure out how to do this.” The platform funded 21 loans totaling $437,500 leading to improved energy access for 119,500 people, according to the company’s web site.

But the co-founders quickly realized there was much more fundraising potential in attracting more money from fewer investors, who also were accredited or institutional. With that in mind, in 2013 they introduced debt instruments, called “solar empowerment notes”-- now “solar notes”--giving high net-worth investors a way to put their money in a diversified portfolio of off-grid solar projects, with a focus on basic residential lighting, instead of resorts and other commercial customers

Then, after a year or so, it became clear that the solar companies they were working with were growing quickly and needed ever-bigger loans. So they decided to retire the crowdfunding platform and focus on solar notes. At the end of 2013 and 2014, they raised $250,000 and $1.4 million. In 2015, the amount increased tenfold, according to the web site.

Recently, the company took the next step, announcing the first close of a new, bigger “beyond the grid” fund. That totaled $21 million, with a goal of raising $50 million, with backing from Overseas Private Investment Corporation, MCE Social Capital and The Rockefeller Foundation. The money will finance an existing pipeline of projects, plus a move into commercial financing.

SunFunder's team (Photo credit: SunFunder)

According to Levinson, in part because businesses need asset and project financing that’s not typically done through standard loans, he also developed new products designed for this market. “We work to understand the market and the challenges and design the right financing product,” he says

One, for example, called SAFI (structured asset financial instrument), is a debt product for off-balance receivables financing, aimed at addressing a particular challenge: Residential solar customer generally can’t afford to pay the whole cost of the system upfront. So businesses usually agree to pay as you go financing, with monthly payments. But that means the solar companies get paid over time--“dribs and drabs’” is how Levinson describes it --creating a need for upfront capital they can use while they wait for the money from their customers. "Pay as you go makes these systems affordable for customers," says Levinson. "But it causes some big problems for solar businesses."